Progressive Grocer Independent

OCT 2014

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October 2014 | Defining the Independent Market | 31 Independent Insights By Peter Larkin Peter Larkin is president and CEO of the Arlington, Va.- based National Grocers Association (NGA), which represents the retail and wholesale grocers comprising the independent sector of the food distribution industry. For independent grocers, 2013 was a challenging year, with competitive pressures rising to new heights. T his September, NGA released the results of its 2014 Independent Grocers Financial Survey. Tis study, which was compiled in conjunction with our partner FMS Solu- tions, analyzed the fnancial and operational output and performance of independent food retailers in fscal year 2013. Te survey serves as a true representation of the independent supermarket industry. Survey respondents represent a wide array of companies throughout the United States: 37.5 percent of respondents are single- store operators, 41.4 percent operate between two and 10 stores, and slightly more than 6 percent operate 31 or more stores. Responding companies have been in business ranging from two to 112 years, with the highest average (42.7 percent) having been in operation between 11 and 40 years. More than half of all respondents do business as S corporations. Despite the fact that the recession "ofcially" ended in 2009, its impacts are continuing to afect consumers and retailers. For independent grocers, 2013 was a challeng- ing year, with competitive pressures rising to new heights. While the nation's economy showed modest growth, same-store sales growth dropped from 1.5 percent in 2012 to 1.1 percent in 2013. However, after adjusting for infa- tion, which was annualized at 0.9 percent, independents held steady at 0.2 percent same-store sales growth. Other key takeaways from the report: • Flat sales growth, combined with slightly tighter margins and higher expenses, resulted in a slight drop in net profts among independents as a group, to 1.51 per- cent. Single-store operators fared better, with an average net proft of 1.63 percent. • Store development remained at elevated levels. In 2013, half of respondents increased capital expenditures, and 44 percent increased capital budgets again in the current 2014 fscal year. Much of last year's activity was focused on remodels, with larger independents adding new stores as well. • Total expenses, predominantly driven by an increase in labor and benefts and utilities, rose for the third consecutive year. Health care costs, which increased by an average of 10.1 percent, continued to be a great concern to independents; more than 80 percent of survey respondents saw their expenses increase in 2013. • Consumers made fewer shopping trips in 2013 (10,704 transactions per store, per week), but spent a little more on average ($24.38) when in the store. Interestingly, stores with loyalty programs showed a greater number of transactions and a higher-than-average transaction size. • Independents are increasingly focusing on private brands, with 63.6 percent of independents noting a rise in the number of private-brand items stocked. Additionally, the report provides a review of the na- tion's economic and political landscapes and how they impact independent food retailers. Food retailers are dealing with a number of political concerns that greatly impact their operations and bottom lines. No surprise here; the top issue dominating the political concerns index was the Afordable Care Act (ACA). Sixty-four percent of respondents ranked health care reform as their No. 1 issue. Along with the ACA, swipe fee regulation, job creation/unemployment, energy policy and defcit spending rounded out the top fve political concerns of independent grocers. Te year 2013 proved to have many ups and downs for the independent supermarket industry, but as always, in- dependent grocers continue to adapt and respond in what remains a tough recovery for our economy. Te annual report has become a critical benchmark- ing tool for independent grocers. To purchase the study or for more information, visit www.nationalgrocers.org or contact NGA at 703-516-0700. PGI Ripple Effects The recession may have officially ended in 2009, but the latest NGA data show that independent retailers are still recovering.

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